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| Handling people in a mixed up office. Part 1 (May 2008) |
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Experts will tell you how to handle employees from this generation, or from that one. But they never recognize the CEO’s real challenge: handling them all at the same time. A banker roundtable explores multigenerational management. By Steve Cocheo, executive editor, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
PART I OF A TWO-PART ABA BANKING JOURNAL ROUNDTABLE Bankers taking part in the roundtable are members of ABA’s America’s Community Bankers Council. Frank L. Carson III, President and CEO, Mulvane State Bank, Mulvane, Kan., $80 million-assets, 38 FTE Pat Glotzbach, President and CEO, New Washington State Bank, New Washington, Ind., $212 million-assets, 87 FT Stephen J. Goodenow, President, Bank Midwest, Minnesota Iowa, NA, Okoboji, Iowa, $450 million-assets, 160 FTE Blair Hillyer, President and CEO, First National Bank, Dennison, Ohio, $170 million-assets, 65 FT Ken Hughes, President and CEO, Merchants & Farmers Bank & Trust Co., Leesville, La., $200 million-assets, 80 FTE Robert R. Jones III, President and CEO, United Bank, Atmore, Ala. , $470 million-assets, 180 FTE John A. Klebba, President and CEO, Legends Bank, Linn, Mo., $220 million-assets, 65 FTE George R. Marx, President and CEO, Copiah Bank, N.A., Hazlehurst, Miss., $130 million-assets, 61 FTE But the thing that many of the experts don’t acknowledge is that real bankers aren’t dealing with any one generation. Instead, they frequently deal not only with a range of age groups, but a range of corporate-culture viewpoints, as well. Case in point: Pat Glotzbach’s New Washington State Bank, in Indiana. “We have two sets of employees,” says Glotzbach, one of eight members of the America’s Community Bankers Council who met with ABA Banking Journal. “The first group is those who have been with the bank for 20 to 25 years, or even longer. Historically, these employees were hired to do specific jobs. Generally, they are very challenged when it comes to offering products and selling.” Glotzbach appreciates the skills that these employees have, but recognizes that the world’s been changing. “Over the last five years,” he continues, “we’ve made a significant effort to hire sales people, attractive men and women who can meet the public well, who are at ease talking to the public not only at their desks but also in the lobby. And we’ve made a significant effort to hire people who have degrees, or who are working toward a degree.” As a result, Glotzbach manages two workforces, each with different needs, expectations, and ways of operating. The older group do their jobs, don’t ask many questions, and “kind of go on with life,” the banker says. The newer employees hold out the promise of greater production of sales—but not without management. “You can’t handle them the same way,” says Glotzbach. “They want structure. They want to know what their job is. They want to know how they are going to be measured. They want to be measured, whereas the older employees, they really don’t want to be measured.” The newer hires “require more attention,” says Glotzbach. “They like to be praised,” he explains. “ ‘Good job on that referral’, ‘Gosh, you did a great job on that such and such’, that kind of thing. They also want your to sit with them and explain your company’s benefits.” In fact, Glotzbach says the need to interact more with newer employees has led the bank to hire a full-time human resources officer, who handles much of the one-on-one. Further, he has found that the newer employees not only come aboard with more education, but want more training than traditional employees did. So the bank has also hired a training expert. Glotzbach says that a new philosophy in hiring has also emerged from all this. Bringing people on board used to be a matter of matching candidates’ skill sets and experience to present bank openings. “But today, for us to be successful as community bankers, says Glotzbach, “we can’t just hire people for what they can do today. We’ve got to hire them for what they can do in the future.” People you thought you understood The issues that Glotzbach faces with newer employees were seen by other bankers on the panel. But what complicates things is that some bankers face new challenges even with their more seasoned, more experienced pool of employees. Take the experience of George Marx, at Copiah Bank, N.A., Hazlehurst, Miss. The bank has opened three new offices in the last four years, which has required hiring many new employees. About 60% of the bank’s workforce has been there for more than 25 years, and Marx said he felt considerable “culture shock” when hiring the loan officers and managers for the branches. The shock had to do with expected salaries—his expectations versus theirs. His top pick for one market, a high-growth area, “was already making 30% more than any officer in my bank, except me,” he says. This led to a gut-busting internal struggle, he says. “How was I going to justify paying someone so much more?” than the bank’s current pay structure provided for, says Marx. As time went on, Marx had to swallow hard and pay up. And up. “I paid that guy $85,000 to start,” says Marx, “and I gave him some incentives, too.” That was three years back. Now, Marx continues, the banker is making $100,000, and, with incentives, has hit $120,000 in each of the three years he’s been there. Big numbers. “But he’s done a tremendous job,” says Marx. Likewise, Robert Jones, of United Bank, Atmore, Ala., has seen HR costs rise in the course of bringing five new branches on line. “With the mergers that have occurred in our region, we’ve been able to pick up some more experienced and seasoned employees from the larger holding companies,” says Jones. “So, actually, our applicant pool has been older than we traditionally see. That’s changed things considerably, because they’re coming in with a different expectation.” These seasoned employees expect not only more money, but more fringe benefits than do younger employees. They come aboard expecting the vacation time they earned in their old jobs, too. All of this means ever-greater HR expense, but Jones says it’s been worth it. “What we’re buying is experience, and we’ve seen it as a good investment,” he says. “Detraining” required Jones faces an additional challenge when importing these seasoned bankers, as well: corporate culture shifts. “We spend a great deal of time on ‘detraining’ them from the big-bank way of doing things,” says Jones. In part, their thinking needs to be adjusted, because, coming from larger banks, they tend to be more specialized, and Jones needs them to think a bit more like generalists. Corporate fit has been a challenge, as well, for Ken Hughes, of Merchants & Farmers Bank & Trust Co., Leesville, La. Merchants & Farmers has been branching into a market formerly covered only by a loan production office, and has, like Jones, been picking up officers from large banks. “We find it difficult to get the people that we brought over from the JP Morgan Chases and the Capital Ones of the world to learn how to be community bankers,” says Hughes. A major challenge has been getting these bankers to see that a community banker must not only get through the typical lender’s “to do list,” but also take on additional tasks that go hand in glove with community banking. And yet, attracting such talent takes dollars up front. “We’re paying more signing bonuses than we ever did,” says Hughes. The highest the bank has paid is $12,000, though Hughes expects to exceed that, going forward. Other man’s cash is always greener Money talks, but what it says to employees can sometimes be troubling. One such instance is seen at Steve Goodenow’s Bank Midwest, Minnesota Iowa, NA, Okoboji, Iowa. Goodenow’s organization has purchased insurance agencies as well as investment firms and this has changed the compensation dynamic in the bank. “Our highest-paid folks are selling insurance and investment products,” says Goodenow, because they came into the organization being paid for production. The bank chose to leave their traditional pay plans as they were, so it has quickly become apparent to the bank’s traditional employees that people who sell nontraditional products are doing well. “We all know that if you incent for loans, you can end up with a pile of loans that you really don’t want,” he says. What this leaves is a puzzle: “Keeping the good commercial loan officers compensated in the same realm as the other producers in the company.” So far, a solution has eluded him. The curse of zero turnover Meanwhile, the aging of the banking workforce concerns both those who have had some “youthening” among their staffs as well as those who have more static employee populations. “We’re in somewhat of a unique position, in that we’re in slow-growth markets and have almost zero turnover,” says John Klebba of Legends Bank, Linn, Mo. In one sense, that’s a blessing. Zero-turnover keeps training costs low. But it’s a curse, too, says Klebba, because his workforce is aging, especially on the lending side. “There’s a bunch of us that are in our late 40s and early 50s. That’s OK for now, but in ten or 15 years the real danger is that a big group is going to leave at virtually the same time.” Other bankers in the roundtable report similar concerns. At Merchants & Farmers Bank, for instance, the average age for upper and middle managers is about 60. “It kind of slapped us in the face a few weeks ago,” Ken Hughes admits, “when our investment officer, a senior vice-president, suddenly died of a heart attack.” Frank Carson, at Mulvane State Bank, Mulvane, Kan., says a strategic planning exercise underscored his family-owned bank’s age challenge. There’s a cadre of senior bankers there who were hired roughly four decades ago who are gradually retiring now. “Bit by bit, we’re replacing those people with younger people, but we’ve been lucky so far in that the people that we’ve been able to bring in have actually not been in banking before,” says Carson. These newcomers worked in other fields, and, being interested in financial services, were willing to come aboard at reasonable salaries. “I don’t expect that to continue in the future,” says Carson. Not my bag, Mr. Banker Also facing a future of “serial retirements” in a low-growth area is Blair Hillyer, First National Bank, Dennison, Ohio. “I always knew this was going to happen, because everybody I hired was older than I was, at one time,” says Hillyer. “I’ve been with the bank so long now that we’ve had a retirement in ’04, ’05, ’06, and ’07, and in about three years I’m going to lose several more key people.” What worries Hillyer is that, when he interviews prospective bankers, he relates, “I hear more about the things that they don’t want to do, than the ones that they do want to do.” This concerns Hillyer. “This is a different kind of business,” he explains. “You have to multi-task, you have to be willing to give up some of your own time for your customer’s time, and I’m not feeling that with the new generation.” Something else that Hillyer has noted is a workplace “generation gap” that goes to the heart of the culture issue. “We have a lot of 15-to-20-year employees, and they do a wonderful job and they made the bank very successful,” says Hillyer. “However, they are not greeting the new folks with open arms.” Meshing different ways of working, and looking at the world, is proving to be a challenge. Hillyer’s big concern is that he’s not seeing a top management prospect in the mix of potential employees he interviews. “Ultimately, I’m looking for my own successor,” he explains, “and that’s not going well.” Look two or three moves ahead Alabama’s Robert Jones thinks the key to meeting this kind of staffing challenge is strategic thinking. “HR is kind of like a chess game—you’ve always got to be looking ahead, two or three moves. Keep in mind who’s got talent and where they are. You’ve got to be flexible,” says Jones. Indeed, Jones says he has started to rely on the appeal that a rural area can have for some big-city professionals. “Often, we’ll find someone like that, and we don’t even have a position for them. But when somebody good like that crosses your path, you need to grab them,” says Jones. “And one of the advantages of having some turnover is that, sooner or later, something opens up.” Jones admits that he had to sell the bank’s HR director on this “hire now, fit in later” policy. Indeed, co-panelist Blair Hillyer wasn’t entirely sold on how well this idea would work in his market. “I had someone on the payroll for four years. I got him pretty well trained in a lot of areas of the bank and he’s now a vice-president for a large holding company,” says Hillyer. “And we’re talking to him a little to see if he wants to return to his roots. But he’s in a big city market now, he’s only about 30, and the lifestyle there is attractive to him. That’s a challenge.” Universal appeal of ownership This led the bankers into a technique that some have found very helpful for retaining employees: giving them a piece of the action through formation of an Employee Stock Ownership Program. For some banks, this wasn’t practical, nor immediately appealing. Frank Carson of Mulvane State Bank, for instance, pointed out that his family, which now owns the bank, had worked for years to achieve that. So it was unlikely the family would turn around and dilute its ownership with an ESOP. Other bankers could hardly find enough superlatives to describe their experiences. One strong booster moved into an ESOP for the sake of employee retention, and the other turned what was originally a tax transaction into a strategic move. Here’s some dialogue about ESOPs: Glotzbach About eight years ago we started an ESOP. We wanted our employees to have ownership so that they would have more pride in what they do each day. Today, the ESOP owns 18% of the bank. At about the same time we launched a profit-sharing program, where we pay for performance over 15% ROE. Two years ago we paid a total of $1.4 million into the profit-sharing plan. In 2007 we paid $1.1 million. And then the final piece of the puzzle was that we became a S corporation. And the ESOP benefits from that, too. Our ROA was always 1%, but in the years since the ESOP, it’s run 1.5%, 1.6%, 1.7%. And that’s after paying the profit sharing. Goodenow Our bank does business in nine locations—the result of a number of acquisitions where the previous owners left. That tended to leave a void—we weren’t the “local bank” anymore. By putting in an ESOP, I think we finally reconnected with our communities, and our employees “get it.” They understand that they can make decisions that affect the customer, that affect the company. And it’s a competitive advantage if people step up and make decisions—good decisions, hopefully—on behalf of both the company and the customer. We’ve gotten very involved with a group called the National Center for Employee Ownership (www.nceo.org), to leverage that ownership culture. A couple of times a year we do a big deal around ownership. Carson Did you do the ESOP strategically? Or was it one of those things where you needed the ESOP to make a purchase work, or something like that? Goodenow It was a tax transaction, in the beginning. We had merged an S corporation with a C corporation and the C had an IRA with a significant shareholder. So all that, and resulting complications, made an ESOP an attractive tool. As we moved that way, I pleaded, “If we’re going to do this ESOP, let’s do it right. Let’s not just do it for the tax play. So it became part of cultural change in our organization. The ESOP owns 10% of the company now. About 70% of the company is owned by my family and other family members. The rest we’re hoping will end up in the ESOP at some point. Glotzbach You know, one thing about benefits is that many banks offer good ones, but we don’t know how to explain them to our people. Unfortunately, sometimes they go somewhere else, thinking they are getting a better deal. Yet they actually had the same deal—or even a better deal—with us. We communicate our benefits in two ways. New hires meet with our HR person. Employees receive a statement four times a year that demonstrates the value they are getting from the profit-sharing plan and the ESOP. Now if you look up our numbers, you’ll see we’re probably the highest paying, as far as benefits and salaries, in Indiana and I firmly believe you get what you pay for. BJ Next month in Part II The roundtable bankers tackle the thorny issues of employee medical plans and incentive compensation. Also, a focus on one roundtable banker’s use of an employee profiling product that he’s found very helpful.
The electronic version of this article available at: http://www.nxtbook.com/nxtbooks/sb/ababj0508/index.php?startid=18
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